Probe into the Miccosukee's Gambling Profits

Naught, naughty. Bad boy. Bad boy.



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“IRS steps up probe of Miccosukee Tribe’s payouts of gambling profits to members”

(Miami Herald) The Internal Revenue Service has escalated its investigation into the Miccosukee Indians’ finances, demanding that the West Miami-Dade tribe hand over a mountain of internal records showing millions in allegedly unreported payments from its gambling profits to tribal members.

The IRS’ sweeping new action, which the Miccosukees are trying to stop in Miami federal court, seeks internal documents of the tribe’s gaming distributions during 2006-2010 as well as its council meeting records on tax matters from as far back as 1985.

The agency is demanding a long list of documents — from Miccosukee disbursement statements to check register reports, plus any tax advice from tribal lawyers and accountants. It’s part of an aggressive push to recover potentially tens of millions of dollars in back income taxes.

The tribe lashed out at the IRS.

“No longer is there even a pretense that the United States is not seeking to harass the Miccosukee Tribe and its members,” the tribe claims in court documents.

“The Miccosukee Tribe is not subject to income taxes, yet the IRS seeks all of its records based on sections of the [tax code] that do not even apply to the tribe,” wrote Miccosukee lawyer Bernardo Roman III in court documents.

Roman could not be reached for further comment Tuesday.

The federal agency’s legal battle with the Miccsosukees has been raging over the past decade, with the IRS winning a series of fights over access to the tribe’s financial accounts held by banks and other third parties. The tribe, which has tried to use its sovereign status to block the IRS’ civil probe, might now be on the hook for taxes owed by many of its 600 members.

The reason: The tribe’s status as a sovereign nation means the entity itself is not subject to taxes under federal law. But once the tribe distributes profits from its gambling casino to members, they are individually responsible for reporting and paying taxes on their annual income tax returns, according to the IRS. The tribe is also responsible for reporting and withholding a portion of any personal income distributed from its gambling enterprise featuring bingo-style slot machines and poker.

Earlier this year, the tribe admitted that more than 100 Miccosukee Indians owed the federal government about $25.8 million in back taxes, penalties and interest on income the tribe handed out from its gaming operation off the Tamiami Trail during 2000-05.

A federal judge has repeatedly sided with the IRS in its quest to obtain the tribe’s financial records. Last month, U.S. District Judge Alan S. Gold denied the tribe’s bid to block the IRS’ summons for Miccosukee financial accounts for 2010.

Gold said the U.S. government’s sovereignty was “superior” to that of the tribe, and therefore the Miccosukees must release their financial records held by Morgan Stanley Smith Barney, American Express, CitiBank and Wachovia.

Gold’s ruling was consistent with his previous decision ordering the tribe to turn over the same financial records for 2006-09.

The tribe has a long history of fighting the federal government over major issues ranging from income taxes to the cleanup of the Everglades.

But since the ouster of Miccosukee Chairman Billy Cypress in late 2009, the tribe has filed one lawsuit after another against the former leader and his inner circle of advisers, including two ex-U.S. attorneys in Miami who represented the Miccosukees.

In a federal suit filed last month, the tribe accused Cypress of stealing $26 million from the Miccosukees to spend on numerous gambling trips, shopping sprees, real-estate investments and luxury cars. The suit claims Cypress conspired with two former Miccosukee financial officers, former U.S. attorneys Dexter Lehtinen and Guy Lewis, and a Miami brokerage firm, Morgan Stanley Smith Barney, to keep the tribe in the dark about his alleged “criminal enterprise.”

The federal racketeering suit claims the tribe did not “discover this massive web of financial theft, embezzlement and fraud until 2010,” when Colley Billie replaced Cypress as the Miccosukee chairman.

The suit details a total of $11.5 million in ATM withdrawals by Cypress at casinos in Las Vegas and elsewhere, along with an additional $4 million in American Express charges for jewelry, restaurants and other expenses, between 2006 and 2009. Cypress also acquired nearly a dozen properties and residences, from Miami-Dade to Panama City Beach, worth a total of $4 million.

The tribe’s suit targeting him is the latest of his legal woes. In 2010, the IRS claimed that Cypress personally owed the government almost $2.8 million in taxes and penalties on $6.65 million in unreported income during 2003-05.